Jewellery chain Michael Hill International will shut shop in the US after 10 years of losses, and reduce the store count of its struggling charm brand Emma & Roe.
The Brisbane-based retailer’s US business and Emma & Roe stores accounted for five per cent of group revenue in the last financial year, but booked a combined $12 million loss.
The company announced on Wednesday that it will close its nine US stores and expand the Emma & Roe product range, focusing on online sales and reducing the number of bricks-and-mortar outlets.
Michael Hill chief executive Phil Taylor said the US business has failed to gain traction and, while disappointing, it was time to cut losses.
The financial impact has yet to be calculated.
“Getting out makes sense: it will reduce our losses and free up our resources,” Mr Taylor told AAP.
“When you have two businesses struggling, you spend a disproportionate amount of time working on those and not thinking about other markets and channels.”
The jeweller, which began in New Zealand nearly 40 years ago, launched in the US in 2008 and bought stores in Illinois and Missouri before having to close half those stores several years later.
Mr Taylor said the US jewellery market is highly competitive, malls had fewer shoppers, advertising was costly and the industry is under significant pressure with about 1,000 jewellery stores closing a year on average in the past eight years.
“Driving foot traffic has been challenging and the dynamics of the US economy is tougher,” he said.
“The demographic in the US and where the wealth is held and what portion of the population have disposable income is quite a different proposition to Canada, Australia and New Zealand.”
He said the company will expand its Michael Hill stores in Canada, which has been a highly successful market for the business.
As for Emma & Roe, the remainder of the financial year and the whole of 2018/19 will be a test and trial period for a brand that has 30 stores in Australia and New Zealand.
Mr Taylor said Emma & Roe, which began as a charm, bracelet and pendant retailer four years ago, will continue to expand its offer to include other accessories, including watches.
He said the brand will be repositioned into targeting the more affordable “demi-fine jewellery” for consumers.
The company expects to make non-cash writedowns of about $7 million against its Emma & Roe stores and plans to complete its review of the business by the end of February.
It currently has 317 Michael Hill stores, with the majority in Australia, 83 in Canada and 53 in New Zealand.
The dual-listed retailer revealed earlier this month weak comparable sales growth for the first half, including a 10 per cent fall in same-store-sales in the US and a 5.4 per cent drop for Emma & Roe.
Michael Hill’s shares on the ASX – the company is also listed on the NZ stock exchange – gained eight cents, or 6.5 per cent, to $1.305.